Social Security: US vs Chile
I haven’t commented on the Social Security debate in awhile, because a) there is a problem, every one knows it! b) how could any proper thinking person object to a private retirement account. To emphasize the point, the NYT on April 26, had The Proof’s in the Pension by John Tierney.
In 1981, Chile, in response to its social security system going broke, privatised its social security. The US about the same time in response to the same pressures, chose to raise taxes and cut benefits. Tierney visited his old college friend in Chile and compared plans.
After comparing our relative payments to our pension systems (since salaries are higher in America, I had contributed more), we extrapolated what would have happened if I’d put my money into Pablo’s mutual fund instead of the Social Security trust fund. We came up with three projections for my old age, each one offering a pension that, like Social Security’s, would be indexed to compensate for inflation:(1) Retire in 10 years, at age 62, with an annual pension of $55,000. That would be more than triple the $18,000 I can expect from Social Security at that age.
(2) Retire at age 65 with an annual pension of $70,000. That would be almost triple the $25,000 pension promised by Social Security starting a year later, at age 66.
(3)Retire at age 65 with an annual pension of $53,000 and a one-time cash payment of $223,000.
There should be NO debate. We are a capitalist country. Capitalists champion private vs public solutions to problems. It is amazing that other countries without our traditions can show us the way and remind us to be Capitalists.
Interesting simplification, Mover Mike! Sometimes, that’s the best way to get points across to the masses whose life style may be too hectic to address anything else?
As a Nation, “we” should definitely pursue our strengths … not our weaknesses.
Thanks for the lesson in Chile 101
Good information, we need more of it to help us understand why private accounts will help so much.